Concentrate on domestic market
THE much talked about "world market" is something UK dairy farmers should ignore completely. Their future lies in supplying the domestic market, according to quota broker Ian Potter.
"To the British dairy farmer, the liquid market – with 56m consumers – is the most important. Its domination should be the focus. We only have 16% of the EU population, but account for a massive 25% of EU liquid milk consumption," Mr Potter told delegates at this weeks Semex conference in Glasgow.
"Many people pontificate about competitiveness and the magical words world market," he said. "My question is: Why do we want to participate in markets where we cannot earn anything?
"It is not profitable for UK dairy farmers to export without subsidy, and it never will be. So why do we need to aim for the world market? The fact is that the largest and wealthiest market for dairy products is Europe."
The biggest problem to be addressed was working together at home to secure a realistic milk price, he believed.
"There is much talk of the need for partnership between farmer groups and processors," said Mr Potter. "But for trust to develop, it was essential for all sides of the industry to understand more about each other.
"One obstruction to greater co-operation between processors and farmers is the notion that processors are making a killing from farmers. I think this is fiction.
"Processor profits are higher when the milk price is dropping. However, if the City viewed the sector as capable of delivering a high return to investors in the future, the Express Dairies share price, for example, wouldnt be as low as it is. Its on the floor, and has been for a while."
Equally, farmers who believed that their salvation lay in processing their own milk had to be realistic.
"For a typical co-op processing 1bn litres of milk, a processing arm would have to make at least £10m profit a year to equate to 1p/ litre on the milk price," he said.
Processors are not making a killing from farmers, says Ian Potter.